1. Textron is considering a NEW project. The financial projections are as follows:Year 0Year 124,0007,000Year 224,000Year 3Sales24,000Total Costs7,0007,000DepreciationCapital Investment (or Cost of Equipment)Working Capital (Requirements/Levels)10,00010,00010,00040,000200025001000The Equipment will be sold at the end of Year 3 for 11,000. The relevant tax rate is 35%.Compute the cash flows for the project.Please select file(s) Select file(s)

Net cash flows = Profit after tax + depreciation + Salvage -Tax on salvage - weoking capital Profi…

1. Textron is considering a NEW project. The financial projections are as follows: Year 0 Year 1 24,000 Year 2 24,000 Year 3 24,000 Sales Total Costs 7,000 7,000 7,000 Depreciation Capital Investment (or Cost of Equipment) Working Capital (Reguirements/Levels) 10,000 10,000 10,000 40,000 2000 2500 1000 The Equipment will be sold at the end of Year 3 for 11,000. The relevant tax rate is 35%. Compute the cash flows for the project. Please select file(s) Select file(s)

1. Textron is considering a NEW project. The financial projections are as follows: Year 0 Year 1 24,000 Year 2 24,000 Year 3 24,000 Sales Total Costs 7,000 7,000 7,000 Depreciation Capital Investment (or Cost of Equipment) Working Capital (Reguirements/Levels) 10,000 10,000 10,000 40,000 2000 2500 1000 The Equipment will be sold at the end of Year 3 for 11,000. The relevant tax rate is 35%. Compute the cash flows for the project. Please select file(s) Select file(s)

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 19EA: Redbird Company is considering a project with an initial investment of $265,000 in new equipment...

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Redbird Company is considering a project with an initial investment of $265,000 in new equipment that will yield annual net cash flows of $45,800 each year over its seven-year life. The companys minimum required rate of return is 8%. What is the internal rate of return? Should Redbird accept the project based on IRR?
Suppose you have the following two investment projects with operating costs and revenues over 5 years: Year Project A Project B Revenues Operating Costs Revenues Operating Costs (OMR) (OMR) (OMR) (OMR) 2025 12000 5000 50000 33000 2026 12500 5300 52000 34500 2027 13500 5700 53800 35000 2028 13800 6000 54000 36000 2029 14200 6200 45500 36500 2030 15000 6500 55000 37000 If the investment cost is OMR25000 for project A and OMR155000 for project B, determine which project is the best choice using ARR and IRR methods (Interest rate is 10%).
Use the data below for problems 6 to 10. YearProj YProj Z 0($420,000)($420,000) 1400,000182,000 2185,000156,000 3—146,000 4—175,000 The projects provide a necessary service, so whichever one is selected is expected to be repeated into the foreseeable future. Both projects have an 11% cost of capital. 6. What is each project’s initial NPV without replication? 7. What is each project’s equivalent annual annuity? 8. Now apply the replacement chain approach to determine the shorter projects’ extended NPV. Which project should be chosen? 9. Now assume that the cost to replicate Project Y in 2 years will increase to $600,000 because of inflationary pressures. How should the analysis be handled now, and which project should be chosen?
The following information regarding an investment project is available. Initial investment is £125,000 Scrap Value £10,000 at the end of 5 years Year Inflow 1 £60,000 2 £50,000 3 £10,000 4 £10,000 5 £50,000 A). What is the ARR using the Average Investment formula? Choose one from the following: A. 15% B. 17% C. 19% D. 21%
X construction is considering two projects to develop. The estimated net cash flow from each project is as follows:YearProject X ($)Project Y ($)1110,00075,000265,000150,0003100,00060,0004115,00055,000535,00060,000Total425,000400,000Each project requires an investment of $ 200,000. The cost of capital is 10%.Require toa) Calculate Net Present Value, Payback period, ARR and Profitability Index.b) Which Project is to be recommended to develop based on NPV, Profitability Index, Payback period and ARR? Suggest
1. An ICT project has the following characteristics: annual costs are committed at the beginning of each year, and these are the only costs during the year. Cost at the beginning of year Value (KSh.) 1 250,000 2 300,000 650,000 4 450,000 5 400,000 Total 2,050,000 It is anticipated that when the project is completed at the end of year 5 it will generate an income of KSh. 3,200,000. What would be the internal rate of return (IRR)? Use the shown discount table. Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 20% 25% 30% 0943 0917 0.842 0.833 1 0.962 0952 0.935 0.926 0.909 0.901 0.893 0.885 0877 0.870 0.769 0.800 0.640 2 0.925 0.907 0.890 0.873 0.857 0.826 0.812 0.797 0.783 0.769 0.675 0.592 0.756 0.694 0.592 0.751 0.683 0.693 0.613 0.543 0.480 3 0.889 0.855 0.864 0.823 0.840 0.792 0.816 0.763 0.794 0.735 0.772 0.708 0.731 0.659 0.712 0.636 0.658 0.572 0.579 0.512 0.410 0.455 0.350 0.482 5 0.784 0.746 0.711 0.497 0.432 0.376 0.327 0.284 0.269 0.207 0.159 0.123 0.094 0.073 0.822 0.747…
: According to the data given in the table below and to the annual equivalent expenditure method, which project should be preferred? Cash flows Project A Project B Project C Investment Amount (TL) 1500000 3475000 5900000 Operating expense (TL / year) Salvage Value (TL) Economic life of the project (years) Discount rate (%) 750000 500000 300000 250000 150000 100000 20 18 15 20 18 15
6. U3 Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows. Project Bono Project Edge Project Clayton Capital investment $160,000 $175,000 $200,000 Annual net income: Year 1 18,000 14,000 27,000 14,000 23,000 17,000 16,000 21,000 3 14,000 13,000 4 14,000 12,000 12,000 14,000 9,000 $ 96,000 Total $ 72,000 $ 70,000 Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.) Instructions a. Compute the cash payback period for each project. (Round to two decimals.) b. Compute the net present value for each project. (Round to nearest dollar.) C. Compute the annual rate of return for each project. (Round to two decimals.) d. Which project do you recommend? Why? 2.
A project is estimated to cost P120T, last 8 years & have a salvage value of P20T. The annual gross income is expected to average P50k & annual expenses is P5T. If capital is earning 10% determine if this is a desirable investment using annual cost method, what is the net cost. : a. 24,255.598 b. P24,756.951 c. 25,245.598 d. P27,535.412
U3 Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows. Capital investment Annual net income: Year 1 2 3 4 Total Project Bono $163,200 14,280 14,280 14,280 14,280 14,280 $71,400 Project Edge Project Clayton $178,500 $204,000 18,360 17,340 16,320 12,240 9,180 $73,440 27,540 23,460 21,420 13,260 12,240 $97,920 Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cash Flows occur evenly throughout the year.)
o Calculate the capitalized cost of a project that has an initial cost of P3,000,000 and an additional investment cost of P1,000,000 at the end of every 10 years. The annual operating cost will be P100,000 at the end of every year for the first 4 years and P160,000 thereafter. In addition, there is expected to be a recurring major rework cost of P300,000 every 13 years. Assume i = 15%.
Jay is currently evaluating a project with the following estimated investment requirements ($ millions) by year (starting in year 0): investment year investment 0 11.2 1 16.6 2 15.8 3 11.3 4 18 The estimated revenues ($ millions) from the project, expected to begin at time 3, are given in the table below: \ investment year reveune 0 13.3 1 14 2 8.4 3 14.7 4 9.9 5 8.4 6 13.4 To account for the different risk characteristics throughout the project's life, Jay has determined that a hurdle rate of 24% should be used beginning at time 0, while 30% should be used beginning in period 5. Determine the NPV for the project. NPV =